Question

Foyle, Inc., had 610,000 shares of common stock issued and outstanding at December 31, 2012. On July 1, 2013, an additional 40,000 shares of common stock were issued for cash. Foyle also had unexercised stock options to purchase 32,000 shares of common stock at $15 per share outstanding at the beginning and end of 2013. The average market price of Foyle's common stock was $20 during 2013. What is the number of shares that should be used in computing diluted earnings per share for the year endedDecember 31, 2013?

Answer 1

Answer:

$638,000

Explanation:

The number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2013:

= [(Shares issued at December 31, 2012 × (6 ÷ 12)]

+ [(Shares issued at December 31, 2012 + Additional Shares issued at July 1, 2013) × (6 ÷ 12)]

+  {Purchase common stock  × [(Market price - Purchase price) ÷ Market price]}

= [(610,000 × (6 ÷ 12)] + [(610,000 + 40,000) × (6 ÷ 12)] +  {32,000 × [($20 - $15) ÷ $20]}

= 305,000 + 325,000 + 8,000

= $638,000